Economic Stimulus Via Renewable Energy Transmission Grid

Let’s hope Obama focuses the stimulus package on things we know we need to do anyway. In particular, a modern transmission grid. The current grid is obsolete even for conventional power, and is completely unsuitable for handling big wind energy and solar energy projects that require efficient long-haul capabilities. What can the Feds do? I’m not an economist, but here’s the basics for one initiative.

Arizona sunset

Al Gore and I are in agreement that Obama can kill two birds with one stone by structuring his economic stimulus plan around improving the U.S.’s energy posture – which everyone agrees we need to do, both to achieve energy independence and to mitigate climate change. In his op-ed in today’s New York Times he said:

Here’s what we can do — now: we can make an immediate and large strategic investment to put people to work replacing 19th-century energy technologies that depend on dangerous and expensive carbon-based fuels with 21st-century technologies that use fuel that is free forever: the sun, the wind and the natural heat of the earth.

So, following up on my post from Friday, let’s focus the stimulus package on things we know need doing anyway. In particular, a modern transmission grid. The current grid is obsolete even for conventional power, and is completely unsuitable for handling big wind and solar projects that require efficient long-haul capabilities. What can the Feds do? I’m not an economist, but here’s the basics for one initiative: Solicit the top five or ten proposals for new grid projects (a lot of organizations have already put these together), have a six month vetting process, and for the ones that pass the vetting process, provide substantial incentives for investing in those projects, or guarantee the first $100 million of financing for each.

It’s important that the incentives are given to worthy projects, hence the vetting process, but time is clearly of the essence in getting these projects started, hence the six month window. Who does the vetting? Could be a “blue ribbon panel” (assembled very swiftly), or could be an existing industry group that volunteers (again, in response to an incentive of some kind if necessary).

The idea here is that new grid is likely to be cost-effective and pay for itself (that is, investors will get their money back) but in the current financial market and given the curent set of regulations covering conventional energy it’s difficult to actually raise that money. So the Feds can step in and help make sure that these projects, that are desirable for the economy and the nation in the long-term, are able to get off the ground in the short term. You want to avoid the Feds from “choosing the winners” – that will still be done by the market. But you also need to give the market a nudge along the lines of “we’ll give you some incentives to invest in this rather than in a non-productive financial instrument or in conventional energy.”

There are lots of legitimate fears out there about economic stimulus programs – they’re expensive, they’ll have to be paid back eventually, and they solve the wrong problems. So what does Obama and his brain trust need to make sure we avoid?

Assuming they can “choose the winners”

Funding something that only benefits the already wealthy and doesn’t create jobs (Paulson bailout, anyone?) or improve the country and its opportunities structurally

A set of incentives that are too localized

Al’s and my proposals, I think, address all of these concerns:

My vetting process allows the market to choose the winners

The project will be of benefit to all of us – we need a new grid, and it will enable new kinds of business opportunities for both large and small entrepreneurs. And the projects demand a huge range of skills, from the electrical engineers who design the grid, to the mechanical engineers and technicians who design the transmission lines, to the blue collar workers who manufacture the equipment and build the grid itself

The nature of the transmission grid, and in particular the types of problems this grid needs to solve, are inherently non-local – the electricity has to get from rural areas like Arizona and Wyoming to urban centers like San Francisco, Atlanta, and Chicago

I’d love to hear your feedback on this idea, and also your ideas for the initiatives Obama could pursue to address the financial crisis and the energy independence crisis at the same time.